SEC Suspends Trading in the Securities of Future Canada China Environment Inc.
The Commission today announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 of trading in the securities of Future Canada China Environment Inc., at 9:30 a.m. EST, Jan. 28, 2009, through 11:59 p.m. EST, on Feb. 10, 2009.
The Commission temporarily suspended trading in the securities of Future Canada China Environment Inc. because questions have arisen concerning recent trading activity in the company's stock during which its share price increased from $0.92 to $28.50. Questions have also arisen concerning the accuracy and adequacy of publicly available information regarding its potential acquisition of another company. Future Canada China Environment Inc., a company that has made public filings with the Commission, is quoted on the OTC Bulletin Board and Pink Sheets operated by Pink OTC Markets Inc. under the ticker symbol "FCCE." See In the Matter of Future Canada China Environment Inc. (Rel. 34-59306)
In the Matter of Arthur P. Hipwell
On January 27, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions against Arthur P. Hipwell. The Order finds that Hipwell has been suspended from the practice of law by the Kentucky Supreme Court and lacks the requisite qualifications to appear and practice before the Commission as an attorney.
Based on the above, the Order forthwith suspends Hipwell and denies him the privilege of appearing or practicing before the Commission for a period of one year from the date of the Order. Hipwell consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. 34-59303; File No. 3-13353)
Court Enters Order Dismissing Disgorgement and Civil Penalty Claims Against Defendants James Mulhearn, Damian Delgado and Adrian Balboa
The Commission announced that on Dec. 23, 2008, the Honorable Jose E. Martinez, United States District Court Judge for the Southern District of Florida, entered an order granting the Commission's motion to dismiss its monetary claims against Defendants James Mulhearn, Damian Delgado and Adrian Balboa. The Order, entered pursuant to Federal Rule of Civil Procedure 41(a), dismisses the Commission's claims for disgorgement, prejudgment interest and civil penalties against the Defendants based on their criminal conviction and orders requiring them to pay restitution in parallel criminal proceedings.
Previously, all the Defendants consented to the entry of a judgment permanently enjoining them from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), and Rule 10b-5 thereunder, and Section 15(a) of the Exchange Act as to Balboa and Delgado. In addition, they are barred from participating in any offering of a penny stock.
For further information, see LR-18354 (Sept. 22, 2003) and LR-18769 (June 29, 2004). [SEC v. James Mulhearn, Damian Delgado, and Adrian Balboa Case No. 03-61747-CIV-MARTINEZ in the United States District Court for the Southern District of Florida] (LR-20870)
SEC Obtains Judgments Against Operators of Prime Bank Scheme
The Commission announced today that it recently obtained judgments against three defendants in a previously filed case alleging that the defendants operated a prime bank fraud under the name Asset Recovery and Management Trust (Armtrust) that defrauded hundreds of investors of more than $1.21 million. On Jan. 27, 2009, the U.S. District Court for the Middle District of Alabama entered judgment against defendant Milton J. Vaughn, after granting the Commission's motion for summary judgment, requiring him to pay over $3.3 million in disgorgement of ill-gotten gains plus prejudgment interest and civil penalties. The Court also entered a default judgment the same day against defendant Armtrust requiring that it pay over $2.4 million in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties. In addition, on Nov. 3, 2008, the Court entered a judgment by consent against the estate of defendant Frank R. Johnson, who passed away in 2006. The judgment against Johnson's estate holds it liable for disgorgement of over $1.5 million of ill-gotten gains plus prejudgment interest, but waives payment of all except $31,855, which represents the only assets remaining in the estate. Finally, also on Nov. 3, 2008, the Court granted the Commission's motion to dismiss the charges against a fourth defendant, Carlos F. Alfaro. The Court's recent actions conclude the Commission's case against all defendants in this case.
According to the Commission's Complaint, filed on Dec. 16, 2002, from at least 1999 through 2000, Vaughn and Johnson, operating through Armtrust, an offshore entity they created, defrauded several hundred investors by luring them into participating in a fraudulent Prime Bank trading scheme that sold interests in fictitious, high yield offshore trading programs. The Commission's Complaint alleges that Armtrust purported to offer two things: (1) recovery services in which Armtrust would attempt to recover lost or stolen funds for people who had invested in other Prime Bank trading programs, and (2) investments in Armtrust's own supposed high yield, offshore trading programs. The Complaint alleges that Armtrust's strategy was to lure victims of prior Prime Bank schemes by giving them hope of recouping the funds they lost in past scams and, then, induce them into investing in Armtrust's own scheme. According to the Complaint, Armtrust falsely led investors to believe they could earn between eight and 15 times their original investment in a matter of months and also guaranteed that the investors' principal was fully secured and never at risk. The Complaint alleged, however, that Armtrust's trading programs never really existed, and when investors attempted to recoup their investments, Armtrust refused to provide the purported profits.
The Court's judgments order that:
Armtrust is: permanently enjoined from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934; ordered to pay a civil monetary penalty of $300,000; and ordered to pay disgorgement of $1,210,000 in ill-gotten gains plus prejudgment interest of $960,150.78.
Vaughn is: permanently enjoined from violating Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act; ordered to pay a civil monetary penalty of $1,210,000; and ordered to pay disgorgement of $1,210,000 in ill-gotten gains plus $960,150.78 in prejudgment interest.
The Estate of Frank R. Johnson is held liable for disgorgement of $900,000 in ill-gotten gains plus $657,786 in prejudgment interest, except that payment of all of this amount except for $31,855 is waived due to a demonstrated inability to pay. [SEC v. Asset Recovery and Management Trust, et. al., USDC MD Alabama, Civil Action No. 02-CV-01372] (LR-20871)
United Kingdom Court of Appeal Upholds SEC Asset Freeze Order Against Defendant in SEC Case Alleging Fraud by a Hedge Fund Manager
The Commission announced that on January 28, the Supreme Court of Judicature Court of Appeal in the United Kingdom dismissed the appeal of Glenn Manterfield, a citizen of the United Kingdom, of an order by a British court freezing Manterfield's assets. The High Court of Justice in London had previously issued the order freezing assets held in the United Kingdom by Manterfield on May 16, 2008. Manterfield is a defendant in a pending Commission enforcement action filed in April 2007 in the United States in which the Commission obtained emergency relief, including an asset freeze, against Manterfield and others for their roles in an alleged hedge fund fraud. Among other things, the Commission alleged that Manterfield misappropriated millions of dollars from hedge fund investors.
On Feb. 29, 2008, the Commission filed a limited notice application with the High Court of Justice, Queen's Bench Division seeking an emergency order freezing approximately $1 million in assets held by Manterfield in the United Kingdom. The Commission filed the application after learning that a separate freeze order previously obtained by British authorities against Manterfield's assets might be lifted. After a hearing on the Commission's application on Feb. 29, 2008, the High Court of Justice issued an order freezing the assets until March 6, 2008. Manterfield consented to continue the freeze until the court held an evidentiary hearing to determine whether the freeze should be extended. An evidentiary hearing was held in the High Court of Justice on April 30, 2008, and May 1, 2008. On May 16, 2008, the High Court of Justice issued an order continuing the freeze of Manterfield's assets until the resolution of the Commission's pending enforcement action in the United States. Manterfield appealed the order to the Supreme Court of Judicature Court of Appeal. On Nov. 26, 2008, the Court of Appeal held a hearing and, on Jan. 28, 2009, the three-judge panel unanimously dismissed Manterfield's appeal.
The Commission filed its U.S. enforcement action on April 12, 2007, in the U.S. District Court in Massachusetts against Manterfield, Evan Andersen, of Boston, Massachusetts, and Lydia Capital, LLC, a registered investment adviser based in Boston, Massachusetts. On April 12, 2007, the U.S. District Court issued a temporary restraining order that, among other things, froze the three defendants' assets. On May 3, 2007, following a hearing before the Court on May 2, 2007, the Court issued a consented-to preliminary injunction and ordered a continuation of an asset freeze of the defendants' assets. Andersen has settled the Commission's action against him, and the action is still pending against Manterfield and Lydia.
The Commission's Amended Complaint alleges that, between June 2006 and April 2007, Manterfield and Andersen, acting through Lydia, engaged in a scheme to defraud more than 60 investors, who invested approximately $34 million in Lydia Capital Alternative Investment Fund LP, a hedge fund managed by Lydia. The Amended Complaint alleges that defendants told investors that they intended to use the Fund's assets to acquire a portfolio of life insurance polices in the life settlement market. According to the Amended Complaint, Manterfield, Andersen, and Lydia made a series of material misrepresentations and omissions, including: (1) materially overstating, and in some instances completely fabricating the Fund's performance; (2) inventing business partners, offices, and investors in an attempt to legitimatize the firm and concealing the truth as to why key vendors and banks ceased relationships with the defendants; (3) lying about Manterfield's significant criminal history, and failing to disclose a February 2007 criminal asset freeze against Manterfield in England; (4) lying about how the Fund planned to address certain material risks and failing to disclose others; and (5) misstating the nature of the Fund's assets and its investment process. In addition, the Amended Complaint alleges that Manterfield and Andersen misappropriated millions of dollars of investors' funds by withdrawing investor monies to which they were not entitled.
The Commission acknowledges the assistance of the Financial Services Authority of the United Kingdom and the Securities Division of the Secretary of State of the Commonwealth of Massachusetts, which also filed an action against the parties on April 13, 2007. [SEC v. Lydia Capital, LLC, et al., Civil Action No. 07-10712-RGS (D.Mass.)]; [SEC v. Glenn Manterfield, Claim No. HQ08X00798 (High Court of Justice, Queen's Bench Division, Royal Courts of Justice] (LR-20872)
SEC Seeks Temporary Restraining Order and Asset Freeze to Halt Ongoing Fraudulent Offering Involving the Troubled Asset Relief Program
On January 29, the Commission filed a Complaint for Emergency Injunctive and Other Relief (Complaint) in the United States District Court for the Middle District of Tennessee, Nashville Division, against Gordon B. Grigg (Grigg) and ProTrust Management, Inc., d/b/a ProTrust Management Group, LLC d/b/a ProTrust Management Group, Inc. d/b/a ProTrust Management Group, Inc. LLC d/b/a ProTrust Corporation (collectively, ProTrust). The Complaint alleges that ProTrust, a Tennessee corporation with offices in Nashville, is engaged in on-going securities fraud. The Complaint further alleges that Grigg is a purported financial planner and an investment adviser who controls ProTrust.
From approximately 2007 to the present, according to the Complaint, Grigg and ProTrust defrauded at least 27 clients out of approximately $6.5 million by obtaining such funds from them and claiming to have invested them in securities that do not exist. Specifically, the Complaint alleges that the defendants have: (1) obtained control over client funds and falsely claimed to have invested such funds in fictitious securities that were described as "Private Placements;" (2) created false and fraudulent account statements reflecting the clients' ownership of non-existent securities; (3) falsely claimed that the defendants had the ability to invest client funds in government-guaranteed commercial paper and bank debt as part of the U.S. government's Troubled Asset Relief Program (TARP), and that they did invest client funds in the TARP program; and (4) falsely claimed to have partnerships and other business relationships with several of the nation's top investment firms.
The Complaint alleges that the defendants have violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.
On January 28, Grigg and ProTrust consented to the entry of an order granting the Commission's requests for (i) a temporary restraining order; (ii) an asset freeze; (iii) an accounting of all funds raised; and (iv) an order expediting discovery and preventing the destruction of documents. The Commission's Complaint also seeks (i) preliminary and permanent injunctions against future violations; (ii) disgorgement of ill-gotten gains plus prejudgment interest; and (iii) imposition of civil penalties.
The Commission would like to acknowledge the assistance of the Special Inspector General of the Troubled Asset Relief Program and look forward to continued coordination in this matter. [SEC v. Gordon B. Grigg and ProTrust Management, Inc., et al, Civil Action No. 3 09 0087 (MDTN)] (LR-20873)
Immediate Effectiveness of Proposed Rule Changes
A proposed rule change filed by the National Securities Clearing Corporation (SR-NSCC-2008-13) to revise, eliminate, and add fees for certain services provided by NSCC has become effective pursuant to Section 19(b)(3)(A)(ii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59285)
A proposed rule change filed by the Depository Trust Company (SR-DTC-2009-01) to amend its Deposits Service Guide has become effective pursuant to Section 19(b)(3)(A) (iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59286)
A proposed rule change filed by the International Securities Exchange (SR-ISE-2009-03) relating to fee changes has become immediately effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59288)
The Options Clearing Corporation filed a proposed rule change (SR-OCC-2008-19) under Section 19(b)(3)(A) of the Securities Exchange Act to clarify the text of Rule 1506, which prohibits deposits in lieu of margin for certain options. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59293)
A proposed rule change (SR-NYSE-2009-06) filed by the New York Stock Exchange to temporarily lower its average global market capitalization continued listing standard has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59299)
The National Securities Clearing Corporation filed a proposed rule change (SR-NSCC-2008-12) under Section 19(b)(1) of the Exchange Act, which proposed rule change became effective upon filing, to allow the transfer and reregistration of Fund/SERV eligible fund positions to and from a financial intermediary and a mutual fund company. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59302)
Proposed Rule Change
A proposed rule change (SR-CBOE-2008-117) filed by the Chicago Board Options Exchange to amend Exchange Rule 4.21 relating to third party deposits, has been approved pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of January 26. (Rel. 34-59300)
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